tech-giants-business-models

How Do Tech Companies Make Money? Visualizing Tech Giants Business Models In 2022

In the last years, I had the chance to devote most of my waking hours to think about a big issue for any business: distribution.

The way a company structures its operations become vital to its long-term ability to create value. In fact, the business model is an essential part of any business.

Often, especially in the start-up world, there is the belief that a great product or service is all you need. However, that is not the case.

In fact, the tech giants listed in this article all mastered distribution. There is no doubt that each of them has excellent products and offer incredible services.

However, without a proper distribution strategy, their success wouldn’t have been possible.

Apple: It’s still all about the iPhone

apple-business-model
Apple has a business model that is broken down between products and services. Apple generated over $365 billion in revenues in 2021, of which $191.9 came from the iPhone sales, $35.2 came from Mac sales, $38.3 came from accessories and wearables (AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch, and accessories), $31.86 billion came from iPad sales, and $68.4 billion came from services.

Apple’s business model is based on the sales of products. It is undeniable that the value of those products is based on Apple’s ability to create a friendly environment for its products.

Apple sold over $191 billion worth of iPhones in 2021! 

Apple’s sales breakdown  2021
iPhone $191.97B
Mac $35.19B
iPad $31.86B
AirPods, Apple TV, Apple Watch, Beats products, HomePod,
iPod touch and accessories
$38.36B
Services (Company’s advertising, AppleCare, cloud, digital content, payment, and other
services)
$68.42B
Total $365.81B

As of 2021, the iPhone still represents over 52% of the total sales.

how-does-apple-make-money
Apple’s made over $365.8 billion in revenues in 2021, of which over $191.9 billion or over 52% of its total revenues came from the iPhone. Yet, the iPhone isn’t just a hardware product; it’s a business platform that combines hardware (iPhone), operating system (iOS), and a marketplace (the App Store). Thus, the company still makes most of its money around a single product which powers up an entrepreneurial ecosystem.

Microsoft: The octopus of tech!

microsoft-business-model
Microsoft has a diversified business model, spanning from Office to gaming (with Xbox), LinkedIn, search (with Bing), and enterprise services (with GitHub). In 2021, Microsoft made over $168 billion in revenues, of which over $52 billion came from Server products and cloud services and $39.8 billion came from Office products and cloud services. Windows generated over $23 billion, Gaming generated over $15 billion, LinkedIn over $10 billion, and search advertising (through Bing) over $8.5 billion.

Founded in 1975 Microsoft has survived a few tech bubbles and thrived. In fact, as of the time of this writing, Microsoft is still one of the most valued companies, with a market capitalization of over seven hundred billion dollars.

That is also because the company has been able to use the excess cash it generated in the last decades to acquire new ventures.

In fact, when Microsoft sniffs a trend, it goes all in. For instance, in 2016 Microsoft bought LinkedIn to enter the professional network space.

Microsoft is also in the search and advertising industry with Bing. In short, Microsoft has been able to use its cash cow, the Microsoft Office System to diversify its business model.

Today Microsoft is quite diversified and it comprises platforms, like LinkedIn.

  2021
Server products and cloud services $52.59B
Office products and cloud services $39.87B
Windows $23.22B
Gaming $15.37B
Linkedin $10.29B
Search advertising $8.5B
Enterprise services $6.9B
Devices $6.8B
Other $4.48B
  $168B

In 2021, Microsoft generated over $168 billion in revenues, with server products and cloud services passing for the first time office products. 

Amazon: The everything store

amazon-business-model
Amazon has a diversified business model. In 2021 Amazon posted over $469 billion in revenues and over $33 billion in net profits. Online stores contributed to over 47% of Amazon revenues, Third-party Seller Services,  Amazon AWS, Subscription Services, Advertising revenues and Physical Stores.

Amazon is one of the most disruptive tech companies. It started as an online bookstore to become the everything store; even though most of its revenues come from its store.

There is a growing part of the business that relies on seller services, subscription services (Prime), and cloud-based services (AWS). Therefore, Amazon too has a diversified business model.

It is highly probable that the part of the business related to seller services, subscriptions, and cloud-based services will be the most critical part of the company also from the revenue generation standpoint.

Amazon Revenue Breakdown 2021
Online stores $222B
Physical stores $17B
Third-party seller services $103.3B
Subscription services $31.76B
AWS $62.2B
Advertising $31.16B
Other $2.17B

Although the cloud services represent a small part of the business as of now. What started as a “side project” might be the most important business segment in the coming years.

Google:  The tech giant that became the web

how-does-google-make-money
Google (now Alphabet) primarily makes money through advertising. The Google search engine, while free, is monetized with paid advertising. In 2021 Google’s advertising generated over $209 billion (beyond Google Search, this comprises YouTube Ads and the Network Members Sites) compared to $257 billion in net sales. Advertising represented over 81% of net sales, followed by Google Cloud ($19 billion) and Google’s other revenue streams (Google Play, Pixel phones, and YouTube Premium).

Google’s business model is based mainly on advertising. Even though the company has placed some bets on products that are not related to its main business model.

Even though Google was a latecomer in the search engine industry, it took it over with the algorithm that changed the web: PageRank.

Google Revenue Breakdown 2021
Google Search & other $148.95B
Google Network Members’ $31.7B
YouTube ads $28.85B
Google other $28B
Google Cloud $19.2B
Other Bets

$0.75B

As of 2021 81% of the revenues come from the advertising networks of Google. In fact, advertising generates over $209 billion dollars in revenues; no doubt that is the cash cow for Google.

It is also true that the company is growing other revenue streams (such as Apps, Google Cloud, and Hardware).

Those sources will grow more and more in the future as Google will rely less on advertising. Google’s business model, and ability to create value for several key players – I argue – is the key ingredient to its success.

Facebook: The social network

history-of-facebook
Starting as a social experiment, at Harvard University, back in 2004, Facebook quickly expanded to reach over 1 million monthly active users by the end of the same year. By early 2005, Facebook was already present in 800 college networks. By 2012, as Facebook got ready for its IPO, the company reached over a billion monthly active users.

Facebook has been able to tap into the value of its billion users. Facebook’s business model is based on advertising.

In fact, as of 2021 over 97% of its revenues came from advertising.

Meta Revenue Breakdown 2021 %
Advertising $114.9 Billion 97.5%
Other revenue (payments and fees) $721 Million 0.6%
Reality Labs (primarily sales of Oculus, now called Meta Quest) $2.27 Billion 1.9%
Total $117.9 Billion  

Throughout the 2020s, Facebook went thru a few turmoils. The latest, which posed a threat to its whole business model, was the Apple privacy change policy, which made Facebook advertising machine way less effective. 

This forced Facebook to transition into Meta. A rebrand that was completed in 2022. 

Handpicked case studies from the site: 

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